Economy tanking? Invest in higher ed

To dig out of recession, campus researcher advises, expand access to colleges and universities for tomorrow's 'human capital'

By Barry Bergman, Public Affairs| 03 December 2008

John Aubrey Douglass

BERKELEY — In the national debate over how to rescue the U.S. economy, consensus has jelled around the central questions, at least, if not the answers. Wall Street or Main Street? Buy up toxic assets, or flood the credit markets with ready cash? Bail out the Big Three? What about the millions of homeowners faced with foreclosure? Is it time for a new New Deal, or is monetary policy the key?

John Aubrey Douglass has no particular quarrel with those questions. But there's another one he'd like to get onto policymakers' radar: Shouldn't we start thinking seriously about expanding access to higher education — public colleges and universities especially — as a means of climbing out of recession?

Douglass, a senior research fellow with the campus's Center for Studies in Higher Education, is the editor of — and a frequent contributor to — the center's Research and Occasional Papers series. In his most recent offering, "College vs. Unemployment," he makes an economic case for higher ed, positing that "expanding higher-education funding and enrollment capacity may be as important as any other policy lever to cope with an economic downturn, including funding for infrastructure."

The idea that funding for higher education should be increased during a recession, he acknowledges, is out of step with the current political climate, in which public institutions are taking significant financial hits from their state legislatures. In California, both public four-year university systems are warning of likely cutbacks in freshman admissions unless their budgets are restored to previous levels — even as hard times are pushing more and more college-age students into public higher-ed institutions.

Yet hard times, says Douglass, call for boosting higher ed, not neglecting it. And while he hasn't crunched the numbers himself — he's hoping the incoming Obama administration will consider taking on that task — he says history suggests that higher education can be "a really vital component of mitigating unemployment, and helping to reshape the labor market to make the United States more economically competitive in the world."

"The most well-known and obvious case is the post-World War II period," observes Douglass. The pre-war New Deal, with its heavy investment in public infrastructure, is widely cited as the model for how to deal with an economic downturn, he notes. But he thinks policymakers would be well-advised to look at the postwar years as well, when millions of returning veterans entered college with financial help from the GI Bill.

Among the goals of that landmark legislation, Douglass says, was to "mitigate high unemployment rates" by promoting greater access to higher education: "That wasn't the only driver, but it was one of the major drivers for the development of the GI Bill."

State governments, too, saw the need for a more highly skilled workforce, and acted as partners in the feds' economic strategy. "States such as California," says Douglass's report, "under the leadership of Governor Earl Warren, expanded markedly the physical capacity of the public higher-education systems by establishing new campuses, hiring new faculty, eventually creating their own scholarship programs to supplant the GI Bill, and subsequently reaping tremendous economic and social benefits from the investment in human capital."

What's needed now, says Douglass, is strong national leadership that recognizes the critical importance of higher education, and that is willing to take "a bigger, broader view' of its utility for digging out of recession. The Bush administration, he believes, has been overly focused on "accountability" as an end in itself, and has failed to see the larger picture. Yet while he praises Barack Obama for some "very good ideas" on education — including greater reliance on direct government loans, simplification of federal financial-aid forms, inflation-indexing of Pell Grants for low-income students, and education tax credits for those who commit to two years of public service — "they're simply not enough in light of this really significant financial collapse."

The report calls on the next president to consider a number of short-term actions, such as directly subsidizing state public higher-ed systems and awarding larger Pell Grants to a greater number of needy students. It also proposes a long-term, comprehensive assessment of the nation's higher-ed system, from enrollment capacity to alternative financing models. And it places the problem squarely in the context of America's ability to compete in the global marketplace.

"Those nations that resort to uncoordinated and reactionary cutting of funding, and reductions in access, will find themselves at a disadvantage [in] dealing with the impact of the worldwide recession, and will lose ground in the race to develop human capital suitable for the modern era," the report concludes, adding that higher education "will either be an important mitigation, or a large-scale drag, on economic recovery."

Given the current demands on Obama's economic team — and the general lack of attention to higher education in the national debate over how to get out of the hole we're in — Douglass doesn't expect his report will get a lot of near-term traction in Washington. But he's cautiously optimistic that the incoming administration will come to realize, as did the Roosevelt and Truman administrations, that investing in public colleges and universities can be as important to recovery as building roads and bridges.

"There are these little moments sometimes in policy development, and this is more than a little moment — it's a big moment," he says. "And because the economic downturn is so severe, and the government is having to do things that are unprecedented in the modern era, I think lots of ideas are on the table."